itunes

Here’s the problem with digital music. It’s music. And music consumption is being replaced by the internet and messaging.

Daily book readership, as a percentage of leisure time spent, took a major hit when the radio came around. Radio listenership diminished with the advent of TV. TV is fluctuating but as baby boomers go asunder it, too, will take a back seat to the growth of whatever is next. Even today, if you look closely at ear buds they’re tethered to people staring at the screens (video) not to people with with eyes closed, boppin’ to music.

I don’t listen to much music anymore, unless I’m in a bar. Or when Pearl Jam or X come around. I go to see Hot Tuna (Jorma and Jack) every year but friends orchestrate that. A road trip to Williamsburg to see someone new like Justin Townes Earle is worthy, but I stumbled upon him by accident. The radio really sucks. Pandora is cool, perhaps the only thing that can save music, but the model is wrong. iTunes has sold 10 billion songs since 2003, but made negligible money (on the songs) doing so. Music in the advertising business used to be very important. Now, most music on TV and radio ads is created by the algorithm.

The music business has been mismanaged and mislead. It will come back — but Lady Gaga at $.99 a song will not do it. And it will never be where it once was. As art become replaced by engineering, we lose our humanity note by note. The roots backlash will help the arts but it could get ugly. Peace.

Apple has decided that ebook publishers and retailers, whose books make their way onto Apple devices, must allow the books to be purchased via Apple. If you are an iPazzle owner and go to Amazon to buy “The Help” there must also be a link to purchase that book from iTunes/Store as well. Apple will earn 30%. Sony an ebook retailer has already balked at this dictate.

Apple is not saying you have to buy from them, just that they deserve equal access. Seems fair enough. Apple Fanboys and girls may wish to give their hard-earned to their favorite brand, as is their right, but where will this taking a cut of the content stop? Will Apple at some point want a penny for every phone call that lands on an iPhone? And how would you sell that to your custies? “It goes to R&D to help design better products?” Might work.

Apple, already an opt-in monopoly of almost cult-like dimension, is creating a platform (read Steve Lohr’s article in The New York Times) that stretches beyond hardware and software and into that amorphous area of services. They had better be a bit careful though. Opt-in is one thing…dictatorship quite another. Peace!

I miss Howard Stern, having developed a taste for him while commuting 20 miles a day to an office not far from the Roosevelt, NY town where he grew up. He made me laugh and he talked about things many people thought but never mentioned. When Mr. Stern went to Sirius satellite radio from terrestrial radio I was let down, but not so much that I anteed up a fee for his vocal services. Yesterday it was announced Stern would sign on to Sirius for another 5 years. The Sirius stock, valued at less than $2, moved up $.07 on the news.

It was rumored that iTunes was in the running to pick up Mr. Stern. Now that’s something to think about — Apple getting into the content creation business. Or should we say, furthering it content resale business? I suspect it was more of the latter. Stern has enough money and clout to get his own studio, equipment, lawyers and accountants to pull off the show by himself. In effect, in a deal with iTunes he would using them as a form of PayPal to collect the dough. But Stern opted out. Too much work and too much future.

It will be fascinating to see what iTunes turns into in 10 years. And I’m guessing it won’t be tunes. iTunes may become a competitor to YouTube, to television (network and cable), print and radio. The only question is whether or not there will be an ad-supported business model. iTunes will change everything – even more than it already has. Stern could have helped. Peace.

Reverb Communications, a PR firm based in California that was writing fake product reviews on behalf of clients and publishing them on iTunes, became the first company “snitkered” by the Federal Trade Commission. Tracie Snitker is an executive at Reverb and was the one person sanctioned for the practice, though no fine was levied. Hence the new verb.

It’s not every day you get to come up with a new word, but there it is. Though my work here is never done, I will Peace Out and move on with my Friday. And whatever you do, you social media agents of change, don’t get caught snitkering. It can get kind of sticky.

48% of kids did not buy a CD last year. iTunes is now the number two music retailer behind WalMart. The times they are a changin’.

I just spend 2 days at Digital Music East in NYC and there were a bunch of people walking around with nervous stomachs. Here’s an example of why: one panel on marketing to teens and tweens comprised 30 and 50 year olds, drawing analogies and making references to Led Zeppelin and terrestrial radio. It was silly. The industry has lost touch, it seems.

Back to digital downloads. The real problem with digital downloads, and I’m sorry for sounding like a broken MP3 on this subject, but it’s just too easy to pay for one song — the so-called good song. Fans can’t get to know bands and create affinity with bands through one song. One song is the short story. The album, the novel. Record companies need to sell full albums not single songs. That’s how you build up a fan base. Single songs sales lead to burn-out and one hit wonders.

Steve Jobs made two big announcements yesterday at Macworld Expo, Apple’s annual technology tradeshow. The first was about a new notebook called the MacBook Air. The new MacBook was delivered to the stage in an interoffice-size envelope demonstrating its amazingly thin profile. Great theater.

The other big announcement was an iTunes movie distribution service, which will turn out to be a mistake if you ask me.

Apple is a technology company. An electronics and design company. Getting into media and media distribution dilutes the company’s core competency. I know, I know — Apple is making some nice coin with iTunes, but it is truly reducing the focus of the management team. Each year Apple spends more and more money managing lawyers and biz-dev people – money that would be better served going into product development.

Will the cult that is Apple start to see some cracks? A quote from the New York Times today on the new movie service reads “But the risk for Apple is that consumers may not like the limits placed on their movie viewing,” a point referring to the amount of time in which renters must view the movie before it times out. Apple has always been about expanding capability, not creating limits. Steve Jobs knows this. That’s why the iPhone was such a success. Creating limits for consumers is where the cracks begin. Nice computer. Movie business? Not so much.

Apple was recently sued in Britain for selling songs in iTunes at an inflated price to that of the rest of Europe. (A song in the U.K. cost the equivalent of US$1.57.)

I ask you, in the digital age when purchasing digital assets, what is to keep a person in the U.K. from paying $.99 for a song in America if it costs more then half again that price in England? The currency.

This flattening of the world when it comes to purchasing digital assets is going to create great demand for some sort of global currency exchange or, perhaps, even a new global currency (the world-o?.)

If Pay-Pal figures this out, or some smart bank, we’ll be shopping all over the world easier than shopping in our own town – and saving world-os. (Let’s save the tax discussion for a future blog.)

Remember when it used to be cool to say you worked at Google? That was so yesterday. Apple is the place to work. Apple doesn’t sell out, trying to be all things to all people. Apple takes chances. They maintain their vision and don’t change because a competitor is making more money or has more market share. Apple takes care of its customers. It sees the future and creates cult brands as David Atkins might say.

With the daring introduction of the iPhone, on the heels of iTunes, Apple has really come into its own. Before the fact, old school brand planners might have said about these moves that moving away from its computer franchise was not smart for Apple. But Apple saw the future, it evolved – watching closely what people were putting on their iBooks. Then they moved into telephony. Positioning the iPhone as a phone was a huge strategic decision. (Everybody already knew what Apple did and stood for.) Wouldn’t you have liked to be in the marketing planning meeting, though, when management was deciding what to call the iPhone. “Jesus, it’s not a phone! It’s something completely knew. It’s a media integrator. It’s, it’s, it’s an iLife. No, an iVerything!”

There is a little peeing contest going on between Apple and Vivendi’s Universal Music Group. In the midst of a power play, Universal is talking about removing all of its catalogs from iTunes which will hurt Apple to the tune (sorry) of 1/3 of all new digital songs sold. On the other hand, iTunes (and others) account for 15% of Universal’s music revenue, so that will really ding them. Who will blink first?

As you may have heard me say before, I think the record companies are hurting sales by selling one-off digital songs. It hurt sales by diminishing band loyalty. When I listen to only one “Taking Back Sunday” song (an example only) and a few stanzas of lyrics, I get a shallow understanding of the group – a hard way to build the love. Single song sales build infatuation not love.

This power play by Universal, might just be what the doctor ordered. If they remove their artists from iTunes, it will force more CD sales, which will build greater loyalty for their musicians. Down the road they should see a big positive blip in sales. By then, however, the power play will be over, Universal will have extracted higher margins, and be back on iTunes, and our dirty little secret will be safe. The business will still be in the shitter.

The reason CD sales are down is because of iTunes and file sharing, but not for the reason you think. It’s logical to assume CD sales are down because of $.99 downloads and free file sharing, right? Wrong. CD sales are tanking because there is less loyalty to bands, stemming from consumers ability to buy or download single songs. Instead of listening to a whole album and learning to like the less commercial stuff, (listening to all of a band’s art, in other words) downloaders cherry pick the best songs, wear them out and get bored. Bored with the song, the band, and dare I say, even the live performance. This is problem the industry faces.

We have ADD in America. We need instant gratification and we want it NOW. It’s up to the artists to make us like their art. All of it. There are many ways to build loyalty, but selling songs one at a time, at a discount, is not one of them.

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